ConocoPhillips said capital expenditures that would advance the 740-mile Mackenzie natural gas line project in Canada have been suspended, not all project funding as the company seemed to indicate earlier Thursday.
The statement came after a spokesman for one of the other partners in the proposed project in the Northwest Territories said funding for the project has only been reduced, not "suspended," as ConocoPhillips said in its first quarter 2012 interim update.
"From our standpoint the proponents of the project have decided to reduce spending in line with the reduction of North American natural gas prices," Jon Harding, a spokesman for project's operator Imperial Oil, said.
But ConocoPhillips insisted that spending that would serve to bring the project online has been stopped as the partners await a better economic climate for natural gas.
"The apparent inconsistency arises from the fact that ConocoPhillips and Imperial have different definitions of the word funding," the company said in a statement. "In the case of ConocoPhillips, the term 'funding' means capital expenditures to progress the development of the project."
"For ConocoPhillips, the term 'funding' does not include certain ongoing general and administration costs related to the project, which ConocoPhillips will continue to incur," the company said.
ConocoPhillips said earlier Thursday that "the co-venturers elected to suspend funding of the project due to a continued decline in market conditions and the lack of acceptable commercial terms."
ConocoPhillips has a 75% interest in the Parsons Lake gas field, one of the primary fields in the Mackenzie Delta, which would anchor the development of the proposed 1.2 Bcf/d pipeline.
In addition to Imperial and ConocoPhillips, other partners in the Mackenzie Gas Project include ExxonMobil and the Aboriginal Pipeline Group.
Last July, Shell Canada announced plans to sell its 11.4% stake in the 1.2 Bcf/d Mackenzie Gas Project, as part of a plan to exit from its exploration position in the Mackenzie Delta region.
Harding declined to say by what percentage the partners has decided to reduce their spending on the project, but said the reduction included the closure of two of the project's offices, in Normal Wells and Fort Simpson, and the reduction in the size of the staff of its northernmost office in Inuvik.
O.D. Hansen, a spokesman for the Aboriginal Pipeline Group, said the group had cut back on its staff, as a cost-saving move while it waits for the economic conditions to become more favorable for the resumption of the project.
"All the partners have voted for a 2012 budget that reduced spending," he said. "We're downsizing, while waiting until the prices rebound."
The future of the proposed C$11.3 billion project to carry gas from the Mackenzie Delta on the Beaufort Sea to the Canadian pipeline grid in northwestern Alberta has been called into question by the dramatic increase in gas production from US shale plays and the resultant drop in gas prices across North American.
Although Canada's National Energy Board granted a permit to begin construction of the project in March 2011, the pipeline project's partners remain in negotiations with the Canadian federal government over whether the government will provide some financial certainty to assure that the project can get built.
